Her elevation to the role comes after a series of scandals that caused three elections in the past four years.

Outgoing Prime Minister Bjarni Benediktsson of the right-wing Independence Party called the snap election in September, after less than a year in government, as a scandal revealed in the Panama Papers involving his father prompted a government ally to drop out of his ruling coalition.

The Nordic island of 340,000 people, one of the countries hit hardest by the 2008 financial crisis, has staged a remarkable economic rebound spurred by a tourism boom.

Two of Left-Green's mandates did not support the new coalition, giving the three parties a total of 33 of parliament’s 63 seats.

Ms Jakobsdóttir campaigned on a platform of restoring trust in government and leveraging an economic boom to increase public spending.

She failed to form a left-leaning government earlier this month, but said on election night she was open to forming a broad-based government.

While both the Left-Greens and the Independence Party parties agree that investment is needed in areas like welfare, infrastructure and tourism, they disagree over how it should be financed.

The Left-Greens want to finance spending by raising taxes on the wealthy, real estate and the powerful fishing industry, while the Independence Party has said it wants to fund infrastructure spending by taking money out of the banking sector.